Hathor holding tight to Roughrider

30 August 2011

Canadian uranium exploration company Hathor Exploration, would-be developer of the Roughrider project, has urged its shareholders not to respond to an unsolicited takeover bid from uranium mining company Cameco.

Cameco announced its plans to make a cash offer of C$3.75 ($3.83) per share in Hathor, valuing the company at approximately C$520 million ($531 million) based on Hathor’s estimated fully diluted share capital of approximately 139 million shares. Cameco delivered a written proposal of its offer to Hathor after cordial but ultimately fruitless discussions on a potential board-supported transaction.

Hathor’s exploration properties are focused in the Athabasca Basin in northern Saskatchewan, the origin of some 20-30% of world uranium production over the past 35 years. Its flagship project is the Roughrider deposit, estimated to contain 17.2 million pounds U3O8 (6600 tU) in indicated resources and 40.7 million pounds U3O8 (15,650 tU) in inferred resources.

Drilling in Roughrider's East Zone (Image: Hathor)

Cameco has extensive experience of uranium mining in the Athabasca Basin, and this experience of addressing the geological, technical and logistical challenges presented in the area is one of the reasons why an acquisition makes sense, the company asserts.

In a conference call, Cameco president and CEO Tim Gitzel praised the work done by Hathor’s management in identifying and advancing the Roughrider deposit and its other exploration assets, but said that further development would likely require substantial further funds and expertise. "In our view, it’s highly unlikely Roughrider will become large enough to justify the infrastructure needed to bring it into production on a standalone basis," he said.

Gitzel estimated the capital expenditure needed to build a new mill at Roughrider would run to somewhere in the region of C$500 million, and that development and permitting could take more than 10 years. Cameco, on the other hand, already has two mills in the area – Roughrider is only about 25 km away from Cameco’s operating Rabbit Lake mill. The acquisition of Roughrider would be a "logical addition" to Cameco’s assets, he said, while freeing Hathor shareholders from the "inherent risks" of a company in the early stages of moving from exploration to production.

Hathor begged to differ, describing Cameco’s offer as "opportunistic" and accusing Cameco of "leveraging the market capitalisation set-back in this industry post-Fukushima". Hathor is planning to release its first economic assessment of the Roughrider deposit in September.

Hathor president and CEO Michael Gunning said that the company had not yet received a formal offer from Cameco and urged shareholders to take no action on the offer at the present time.